IDEAS home Printed from https://ideas.repec.org/a/eee/streco/v31y2014icp32-42.html
   My bibliography  Save this article

The role of the Taylor principle in the neo-Kaleckian model when applied to an endogenous market structure

Author

Listed:
  • Ohno, Takashi

Abstract

This study examines the effect of using the neo-Kaleckian model to target inflation. Here, we assume the following: a model with monopolistic competition, a symmetric economy, the inflation conflict theory and the target profit share of firms depends on the number of firms and free entry. Using the neo-Kaleckian model, we find the Taylor principle destabilizes the system, which means that an inelastic nominal interest monetary policy is a plausible way to ensure stability. In addition, we find that the Taylor principle is not compatible with the standard neo-Kaleckian results, including the effects of independent demand and income distribution in favour of workers.

Suggested Citation

  • Ohno, Takashi, 2014. "The role of the Taylor principle in the neo-Kaleckian model when applied to an endogenous market structure," Structural Change and Economic Dynamics, Elsevier, vol. 31(C), pages 32-42.
    • Handle: RePEc:eee:streco:v:31:y:2014:i:c:p:32-42
    DOI: 10.1016/j.strueco.2014.06.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0954349X14000332
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.strueco.2014.06.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 879-907.
    2. Lavoie, Marc, 1995. "The Kaleckian Model of Growth and Distribution and Its Neo-Ricardian and Neo-Marxian Critiques," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 19(6), pages 789-818, December.
    3. Marc Lavoie, 2006. "A Post‐Keynesian Amendment To The New Consensus On Monetary Policy," Metroeconomica, Wiley Blackwell, vol. 57(2), pages 165-192, May.
    4. Peter Skott, 2012. "Theoretical And Empirical Shortcomings Of The Kaleckian Investment Function," Metroeconomica, Wiley Blackwell, vol. 63(1), pages 109-138, February.
    5. Jordi Galí, 2008. "Introduction to Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework," Introductory Chapters, in: Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework, Princeton University Press.
    6. Mario Cassetti, 2003. "Bargaining power, effective demand and technical progress: a Kaleckian model of growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 27(3), pages 449-464, May.
    7. Dutt, Amitava Krishna, 1992. "Conflict inflation, distribution, cyclical accumulation and crises," European Journal of Political Economy, Elsevier, vol. 8(4), pages 579-597, December.
    8. Mark Setterfield, 2006. "Is inflation targeting compatible with Post Keynesian economics?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 28(4), pages 653-671.
    9. Gérard Duménil & Dominique Lévy, 1999. "Being Keynesian in the Short Term and Classical in the Long Term: The Traverse to Classical Long‐Term Equilibrium," Manchester School, University of Manchester, vol. 67(6), pages 684-716, December.
    10. Alan G. Isaac, 2009. "Monetary And Fiscal Interactions: Short‐Run And Long‐Run Implications," Metroeconomica, Wiley Blackwell, vol. 60(1), pages 197-223, February.
    11. Takashi Ohno, 2013. "Models Of Competition Between Firms: Endogenous Market Structure In The Kaleckian Model," Metroeconomica, Wiley Blackwell, vol. 64(1), pages 103-124, February.
    12. John B. Taylor, 2000. "Teaching Modern Macroeconomics at the Principles Level," American Economic Review, American Economic Association, vol. 90(2), pages 90-94, May.
    13. Rowthorn, R E, 1977. "Conflict, Inflation and Money," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 1(3), pages 215-239, September.
    14. Peter Flaschel & Peter Skott, 2006. "Steindlian Models Of Growth And Stagnation," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 303-338, July.
    15. Sen, Anindya & Dutt, Amitava Krishna, 1995. "Wage bargaining, imperfect competition and the markup: Optimizing microfoundations," Economics Letters, Elsevier, vol. 48(1), pages 15-20, April.
    16. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 14(4), pages 375-393, December.
    17. Eckhard Hein, 2006. "Wage Bargaining and Monetary Policy in a Kaleckian Monetary Distribution and Growth Model: Trying to Make Sense of the NAIRU," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 3(2), pages 305-329.
    18. Michael Woodford, 2001. "The Taylor Rule and Optimal Monetary Policy," American Economic Review, American Economic Association, vol. 91(2), pages 232-237, May.
    19. Philip Arsetis & Malcolm Sawyer (ed.), 1998. "The Political Economy of Central Banking," Books, Edward Elgar Publishing, number 1419.
    20. Amit Bhaduri, 2008. "On the dynamics of profit-led and wage-led growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(1), pages 147-160, January.
    21. Taylor, Lance, 1985. "A Stagnationist Model of Economic Growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 9(4), pages 383-403, December.
    22. Amitava Dutt & Anindya Sen, 1997. "Union bargaining power, employment, and output in a model of monopolistic competition with wage bargaining," Journal of Economics, Springer, vol. 65(1), pages 1-17, February.
    23. Dutt, Amitava Krishna, 1997. "Profit-Rate Equalization in the Kalecki-Steindl Model and the "Over-Determination" Problem," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(4), pages 443-451, September.
    24. Dutt, Amitava Krishna, 1984. "Stagnation, Income Distribution and Monopoly Power," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 8(1), pages 25-40, March.
    25. Eckhard Hein & Marc Lavoie & Till van Treeck, 2011. "Some instability puzzles in Kaleckian models of growth and distribution: a critical survey," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(3), pages 587-612.
    26. Eckhard Hein & Engelbert Stockhammer (ed.), 2011. "A Modern Guide to Keynesian Macroeconomics and Economic Policies," Books, Edward Elgar Publishing, number 13962.
    27. Christian R. Proaño & Peter Flaschel & Hans-Martin Krolzig & Mamadou Bobo Diallo, 2011. "Monetary policy and macroeconomic stability under alternative demand regimes," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(3), pages 569-585.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hartwig, Johannes, 2022. "Semi-endogenous growth dynamics in a macroeconomic model with delays," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 538-551.
    2. Murakami, Hiroki & Asada, Toichiro, 2018. "Inflation-deflation expectations and economic stability in a Kaleckian system," Journal of Economic Dynamics and Control, Elsevier, vol. 92(C), pages 183-201.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. OHNO, Takashi, 2014. "The Role of the Taylor Principle in the neo-Kaleckian Model when applied to an Endogenous Market Structure," CCES Discussion Paper Series 54, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
    2. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    3. Sasaki, Hiroaki, 2012. "Is the long-run equilibrium wage-led or profit-led? A Kaleckian approach," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 231-244.
    4. Eckhard Hein & Christian Schoder, 2011. "Interest rates, distribution and capital accumulation -- A post-Kaleckian perspective on the US and Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(6), pages 693-723, November.
    5. Greg Hannsgen, 2014. "Fiscal Policy, Chartal Money, Mark-up Dynamics and Unemployment Insurance in a Model of Growth and Distribution," Metroeconomica, Wiley Blackwell, vol. 65(3), pages 487-523, July.
    6. Takashi Ohno, 2022. "Capital-labor conflict in the Harrodian model," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 301-317, April.
    7. Christian Schoder, 2012. "Effective demand, exogenous normal utilization and endogenous capacity in the long run. Evidence from a CVAR analysis for the US," IMK Working Paper 103-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    8. Eric Kemp‐Benedict, 2020. "Convergence of actual, warranted, and natural growth rates in a Kaleckian–Harrodian‐classical model," Metroeconomica, Wiley Blackwell, vol. 71(4), pages 851-881, November.
    9. Christian Schoder, 2012. "Instability, stationary utilization and effective demand: A synthesis of Harrodian and Kaleckian growth theory," IMK Working Paper 104-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    10. Schoder, Christian, 2014. "Instability, stationary utilization and effective demand: A structuralist model of endogenous cycles," Structural Change and Economic Dynamics, Elsevier, vol. 30(C), pages 10-29.
    11. Stamegna, Marco, 2022. "A Kaleckian growth model of secular stagnation with induced innovation," MPRA Paper 113794, University Library of Munich, Germany.
    12. Christian Schoder, 2012. "Endogenous capital productivity in the Kaleckian growth model. Theory and Evidence," IMK Working Paper 102-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    13. Hein, Eckhard, 2011. "Distribution, ‘Financialisation’ and the Financial and Economic Crisis – Implications for Post-crisis Economic Policies," MPRA Paper 31180, University Library of Munich, Germany.
    14. Soon Ryoo & Peter Skott, 2008. "Financialization in Kaleckian Economies with and without Labor Constraints," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 5(2), pages 357-386.
    15. Mario Cassetti, 2006. "A note on the long-run behaviour of Kaleckian models," Review of Political Economy, Taylor & Francis Journals, vol. 18(4), pages 497-508.
    16. Pintu Parui, 2023. "Worker household debt, functional income distribution and growth: A neo‐Kaleckian perspective," Metroeconomica, Wiley Blackwell, vol. 74(2), pages 446-476, May.
    17. Roberto Veneziani & Luca Zamparelli & Daniele Tavani & Luca Zamparelli, 2017. "Endogenous Technical Change In Alternative Theories Of Growth And Distribution," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1272-1303, December.
    18. Peter Skott, 2010. "Growth, Instability and Cycles: Harrodian and Kaleckian Models of Accumulation and Income Distribution," Chapters, in: Mark Setterfield (ed.), Handbook of Alternative Theories of Economic Growth, chapter 5, Edward Elgar Publishing.
    19. Eckhard Hein & Marc Lavoie & Till van Treeck, 2011. "Some instability puzzles in Kaleckian models of growth and distribution: a critical survey," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(3), pages 587-612.
    20. Takashi Ohno, 2009. "Post‐Keynesian Effective Demand And Capital–Labour Substitution," Metroeconomica, Wiley Blackwell, vol. 60(3), pages 525-536, July.

    More about this item

    Keywords

    E24; E31; Neo-Kaleckian model; Taylor principle; Free entry;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:streco:v:31:y:2014:i:c:p:32-42. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/525148 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.